While the debate continues on whether discouraged work seekers should be included in the second-quarter statistics reflecting the unemployment rate or not (stated anywhere between Statistics SA’s Quarterly Labour Force Survey of 23,6% and the DA’s 29,7%), Cadiz Securities economist Kim Silberman gives her projections for the likely rate of private sector job losses over the next few years.

In Macro Outlook 2009 – 2013, Cape Town-based Silberman notes that according to the latest Quarterly Employment Survey, private sector employment in the first quarter of 2009 fell 2,7% from its peak in the third quarter of last year. The current recession has seen a rate of job shedding that is unprecedented and leads her to expect a further 5,5% drop in employment over the next four years, with a total of 354 700 or nearly 9% of the labour force losing their jobs. Kim has premised this base-case scenario on the strong likelihood of the current downward phase of the business cycle lasting three-years in South Africa, assuming that the global recession lasts until the end of 2010. (Her forecasts do not take exogenous factors into account such as the FIFA World Cup next year.)

However, if the global recovery begins this year, job losses may not be as severe with private sector employment falling by 174 900 over the next two-and-a-half years. If the recession turns out to be more acute, her worst-case scenario predicts nearly 824 000 job losses between the peak of 2008 and 2013, to account for 12,4% of the workforce.

Whatever the extent of the job losses, lower tax revenues will result in less fiscal stimulus and higher debt, lower domestic demand, increased government spend on social welfare, decreased savings, more costly private capital and all-round slower growth that in turn will reinforce the decline in employment. Kim not only explores unemployment in the retail, manufacturing and mining sectors but also looks at the implications for asset allocations.